With the Santa rally dead and buried after the S&P saw two back-to-back 1% drops for the first time since August and sending the S&P sliding back under 6,000, US equity futures finally rose on the last day of 2024, setting stocks on course to snap three days of losses and build on this year’s powerful Wall Street rally. As of 8:00am, S&P futures rose 0.3% and Nasdaq futs were 0.4% higher, with all Mag7 stocks higher. European trading was muted, with several markets shut on New Year’s Eve and shortened sessions in London and Paris. 10Y yields extended their drop, sliding 1bp to 4.52% while the Bloomberg dollar index gained, capping the best year for the US currency since 2015. Bloomberg rebounded and oil dropped. The last day of the year has a sparse macro calendar and includes the Case-Shiller and the December Dallas Fed service activity index.
In premarket trading, the Mag7 were higher across the board (Apple 0.4%, Nvidia 0.7%, Microsoft 0.5%, Alphabet 0.5%, Meta Platforms 0.5%, Tesla 1.1%) as pension selling finally faded. Here are some other notable premarket movers:
With stocks set to end 2024 on a positive note, investors have much to ponder according to Bloomberg: some are concerned about the stamina of this year’s 24% S&P 500 rally, driven by the so-called Magnificent Seven cohort of tech giants. And there’s a range of uncertainties to confront in 2025, from Trump’s protectionist policies to the outlook for central bank policy and the health of the European and Chinese economies. Still, up until the Fed's surprising hawkish pivot- which came once it was clear that Trump and not Kamala would be in the White House - the S&P was on pace for its best year this century. Even with the latest drawdown, stocks are still poised for a stellar 25% return this year, making it three years in the last four that the S&P has risen by more than 20%.
"Investors are in wait-and-see mode,” Noel Dixon, senior macro strategist at State Street Corp., told Bloomberg Television. "We don’t know what the retaliatory effects are going to be and how the Fed is ultimately going to react to those tariffs."
European stock rose, sending the Stoxx 600 up 0.4% to session high; the CAC 40 and FTSE 100 rose 0.4% while other major markets including Italy and Germany are closed. Energy shares are the best performers as they track oil prices higher while miners also outperform. Here are the biggest European movers:
In Asia, trading was thin because several regional markets including South Korea’s were shut for a public holiday. Japanese markets are closed through Jan. 6. Stocks fell in Australia and mainland China, with those in Hong Kong flat. Chinese equities shrugged off data that pointed to an improvement in both services and manufacturing activity. Investors also showed little reaction to President Xi Jinping’s remark that China’s 2024 economic growth is expected to be around 5%, a target set by policymakers earlier in the year. Meanwhile, in the latest sign of simmering tensions between Beijing and Washington, the US Treasury Department said it was hacked by a Chinese state-sponsored actor through a third-party software service provider.
“Don’t think 2024 GDP growth still matters for markets actually as most have already moved towards faith that the government wants to meet the 5% target,” said Xin-Yao Ng, investment director at abrdn. “Perhaps it’s more to do with manufacturing PMI being below consensus, and within that some components like persistently soft input and output prices continue to suggest deflationary pressure.”
In FX, the Bloomberg Dollar Spot Index was steady, on course for its best year since 2015 in a rally fueled by Trump’s reelection in November and the Federal Reserve’s less dovish policy pivot.
In rates, Treasuries climbed, with US 10-year yields falling 1 bps to 4.52%. Gilts outperform their US peers, with UK 10-year borrowing costs down 3 bps. An index of Treasuries looks set to eke out a small gain for the year, with yields edging lower on Tuesday.
In commodities, gold ticked higher, set for one of its biggest annual gains this century after advancing 27%. Oil reversed an earlier gain after factory activity expanded for a third month in China, the latest evidence of economic recovery in the world’s top crude importer. European natural gas prices rose in anticipation of a halt in Russian flows via Ukraine on New Year’s Day, as a transit agreement between the two nations expires. Gas for February rose as much as 2.2% on Tuesday.
US economic data calendar includes October FHFA House Price Index and S&P CoreLogic home prices at 9am, December Dallas Fed services activity at 10:30am. Fed speaker slate is blank until Jan. 3.
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